Understanding insurance premiums, including loadings and exclusions

Insurance premiums are quite simply the amount you pay an insurance company for your cover. The insurance company you are buying a policy or policies from will assess you, and the likelihood of you making a claim, and your premium is calculated in line with this. Even without looking at medical history, insurance premiums can vary for a range of reasons, the most common ones are:

  • Age – the older you are, typically the more you pay for insurance.
  • Gender – females typically pay less for life insurance, but due to claim rates, more for income protection.
  • The state you live in – different states have different stamp duty rates which are passed on to clients.
  • Occupation – not so important for life insurance, but a major factor in income protection.

It’s best to get quotes for a range of companies

At SMFIP we specialise in providing quotes from a range of companies. We believe this is important, as some insurance companies are looking for customers in a particular niche, for example, white collar females in their 30s, and often change the markets they are targeting. For this same reason, premiums will also vary from company to company, even for the same amount of cover. That is why we feel it is important for a company like ours to provide you with a full comparison of insurers to review. We also encourage you to touch base with us at least every few years to make sure your policy is still competitive.

Different policy terms, conditions, and features

Not all insurers have the same terms and conditions or features within their policies. In fact they can vary widely and sometimes this can make it hard for customers to make like for like comparisons when choosing amongst insurers that offer comparable premiums and cover levels. It is often the case that a particular benefit can be of little value to one client but essential to another. For example, a needle stick benefit for a GP is likely going to be a must, but not so valuable for an economist.

At SMFS Insurance Partners, on behalf of our clients, we deal with all the major players in the Australian Insurance landscape. In sourcing an appropriate policy or policies for a client we might review offerings from: Met Life, CommInsure, Clear View, One Path, BT, TAL, Zurich, AIA and NEOS just to mention a few. Our insurance consultants are trained in navigating what can be a labyrinth of detail, to find the best cover for the lowest premium. but this can be a daunting process for the layperson.

Medical insurance loadings

In Australia, premiums might also vary according to your medical circumstances. In fact, in some instances cover might be declined outright. Then there is also the question of what is known as loadings and exclusions. Due to medical considerations, if cover is offered, you might attract a loading of between 50% to 150% on top of your premium.

Life insurance loadings

For life insurance, cover is generally not offered with exclusions, (except all life insurance policies come with a suicide or self-harm exclusion in the first 13 months of a customer taking out a policy). If you have medical issues cover is generally offered with loadings or can be declined. The most common loadings are 50%, 100% and 150%, although we have seen loadings up to 300%. Sometimes insurance companies will put a dollar amount per thousand dollars of cover. For example, if you have a two dollar per thousand loading that means for one million in cover you will be paying two thousand per year more for your cover. We have seen loadings up to six dollars per thousand in rare circumstances for a series of medical conditions.

Income protection, trauma and TPD loadings and exclusions

Income protection, trauma and TPD can all be assessed with loadings or exclusions and sometimes you have the choice on whether to accept a loading or take an exclusion.   The most typical type of loading relates to BMI (body mass index). Generally speaking, a BMI less than thirty will not attract a loading. A BMI in the range of thirty to thirty five can attract a loading or be at standard rates.  Above thirty five BMI there is generally a loading that kicks in, but not always. At SMFS Insurance Partners we know how to navigate the various insurance companies to get the right results for you, as some insurance companies take a more holistic view of your medical condition.

Exclusions are generally comprised of various cases, medical conditions or life activities that cannot be claimed on. The most common forms of medical exclusions include mental health and muscular skeletal (e.g., back exclusions).

Life insurance companies also often won’t cover any death or injuries that arise out of a person being involved in any illegal activity. Even behaving unwisely could see exclusions levelled when a claim is made. These exclusions might include driving dangerously, not adhering to rules or following warnings when using equipment or failing to seek treatment for a medical condition that eventually turned out to be career ending or life threatening. You must bear in mind always that insurance companies are commercial institutions and make all their decisions around remaining commercially viable.

Having said that, because the commercial marketplace, and the forces that govern it are constantly changing, so are insurance premiums, policy loadings and exclusions from company to company. For this reason, it is always prudent to do a comparison with us when you are either sourcing a new policy or renewing an existing policy. Our highly trained insurance consultants at SMFS Insurance Partners deal with these changing circumstances every day.

As you can see there can be important detail around premium levels, exclusions, and loadings when looking at any life insurance, income protection, trauma Cover and total and permanent disability cover. It is important to gather information at every opportunity in understanding your needs and policies that might be offered to you. Our team at SMFS Insurance Partners are on hand and only a phone call away, available to give you no cost advice around your insurance requirements. We’re proud to say we’ve built our reputation on our ability to firstly understand our clients’ individual needs, then provide relevant, appropriate, price effective solutions. Contact one of our team on (07) 3064 0413 or leave a message on the contact us section of our website.